Author: Biupa-TZC, @biupa
In addition to the market and technical indicators that I have been paying attention to, a clue that affects the trend of the currency circle is the macro. Knowing history, we know the rise and fall, and reviewing the past will help us judge the future market.
1. The initial bull market, August 18, 2023-March 2024
The Fed meeting time in the second half of 2023:
July 26, September 2, November 1, December 13, remember four time points first
I think the beginning of this round of bull market is after August 18, 2023. August 18 is a wash, and the time node that appears is very clever.
July 2023 is the last interest rate hike of the Fed in this cycle (we didn't know it was the last time at the time), and the next FOMC meeting was in September 23. At that time, in September 23, it was generally predicted that there would be no interest rate hike (the market would not be able to bear it if it continued to increase), but the dot plot in September predicted that there would be one interest rate hike in 2023 (generally believed to be in November).
The turning point occurred between September and November.
First, Western countries have taken the lead in cutting interest rates (high interest rates cannot be sustained). Second, various data in the United States have improved. Third, financial conditions have tightened (reflected in the sharp drop in the Nasdaq). During this period, market expectations have changed from "there will still be one interest rate hike in 2023" to "no more interest rate hikes in 2023-and interest rate cuts will begin in 2024 (most of the predictions are that interest rate cuts will begin in May 2024)".
Finance is speculation expectations.
Before the Fed's turn in November, traders generally began to bet on stopping interest rate hikes and began to buy-the shift in expectations caused a shift in market risks. The news in the currency circle itself also has expectations of ETF approval. The combination of the two caused the bottoming out of the cryptocurrency market and the bull market that began in October.
There was only one washout during this round of rise, which was the Grayscale dumping after the ETF was launched in January. It continued to rise to the peak in March. Looking back now, there are still many signs that the peak in March can be judged as the top. The macro aspect also saw a huge turning point in March
2. The washout from bull to bear, March 2024-August 2024
The Fed meeting time in the first half of 2024:
January 31, March 20, April 30, June 12, July 31
In January 2024, there was no lack of optimism in the market, believing that interest rate cuts might begin in March 2024. (If this is true, we may directly start an epic bull market)
The CPI and PPI in February and March both rebounded, extinguishing the desire for a rate cut in March. After the March meeting, the market generally bet on a rate cut in June or July.
The March CPI released on April 16 exceeded expectations again, and the unemployment rate also reached a record low, which greatly reduced the possibility of rate cuts in June and July. The market generally believes that the rate cut will be postponed to September.
From the super optimism in January (predicting a rate cut in March), to the delayed but optimistic in March (predicting a rate cut in June), to the greatly increased uncertainty in April (predicting a rate cut in September), the market has been completely bearish since then. I think that since March, the dealers have generally entered the delivery mode. Whether it is predicted from March to June or from April to September, it takes too long to keep the currency price high, so the dealers generally choose to deliver after March. After the Ethereum ETF news on May 20, it was the last chance to escape.
414 is a black swan event similar to 314 and 519. How the market reacts after the black swan event still depends on the macro. After 314, the market started a vigorous bull market, while 414 brought a long period of negative fluctuations. In the final analysis, it was because the deterioration of the expectation of interest rate cuts brought about the violent shipment of the banker. Therefore, every rebound is an opportunity for the banker to ship, which makes the high and low points of the cottage also lower in turn (March 13 top> May 20 top> end of July top> end of August top).
The market was relatively quiet in June and July. Although Bitcoin still had a moment to return to 70,000, the cottage performance was very general. The additional macro events in July were Trump's assassination and Trump's speech at the Bitcoin Conference. These two events led to a wave of rebounds in July. Otherwise, we have reason to believe that after the rebound of 520, the whole of June and July should be in low-level fluctuations until the pin on August 5.
August 5 was the macro-negative event brought about by the unexpected interest rate hike of the Bank of Japan, and the US stock market, Japanese stock market, and currency market all suffered a tragic market crash. I think this negative event is similar to 818 in 2023, marking that the wash has reached a low point, and at the same time brewing the hope for the next stage.
3. The bull market brought about by the interest rate cut, September 2024-December 2024
FOMC meeting in the second half of 24: September 18, November 7, December 18
There are many interpretations of the interest rate cut in September. One is that inflation continued to improve from May to August (CPI May is expected to be 0.4 and the actual is 0.3; June is expected to be 0.1 and the actual is 0; July is expected to be 0.1 and the actual is -0.1; August and September are in line with expectations). The second is that the market has always expected a rate cut in September. The third is that the sharp drop on August 5 has caused "financial conditions to tighten again." Therefore, the rate cut in September was expected.
What was more unexpected was that the rate was directly cut by 50 basis points in September. September was a big surprise. On the one hand, the rate cut in September was 50 basis points vs. the market's forecast of 25 basis points. On the other hand, the rate cut is expected to continue in November and December, that is, 100 basis points for the whole year vs. the market's forecast of 75 basis points.
The unexpected good news in September has greatly boosted the cryptocurrency circle. After September 18, neither the altcoin nor Bitcoin has had a big correction like 414 5175 85 95 (these are all dates, you can look back and analyze them yourself), but has maintained an upward trend overall.
The complete takeoff of the cryptocurrency circle was after Trump was elected on November 5. This is a relatively close history to us, so I will not repeat it (everyone still remembers it).
Fourth, where to go in 2025?
From the above three historical periods, we also understand a truth - the market is swinging. The market will usher in corrections due to excessive optimism, and corrections will bring pessimism, and the overly pessimistic market will be saved by the Federal Reserve, and after the rescue, it will enter over-optimism again - the market is in such a swing.
With the takeoff from September to December, the FOMC on December 18th ushered in another turning point. Although interest rates were still cut in December, the expectations for 2025 were greatly revised. Originally, in September 24, it was expected that there would be 4 interest rate cuts in 25 years, but in December 24, the expectation was reduced to 2 times (here refers to the dot plot). At the same time, the date of the first interest rate cut in 25 years was also greatly postponed from the originally expected January to March (currently March and May have probabilities)
4 times → 2 times, January → March, although we are still in a cycle of interest rate cuts, the slowdown in the rate cuts also constitutes a negative. Therefore, it is not difficult to understand the short and rapid decline of the 18th-20th Shanzhai. In my opinion, this is very similar to the situation after March. However, because there is no black swan, it is just a correction within the currency circle, and the amplitude is not as tragic as 414.
At this moment (January 5, 2025), we are at the moment of the first rebound after a two-week wash. Some people look at the escape wave (then the C wave falls to 86,000), and some people look at the beginning of the mountain season. I currently think that in addition to the market data, it will largely depend on the FOMC meeting on January 28-29, as well as various macro data released in the rest of January.
First, the rest of the data for January include
Based on these data, the market will form expectations of the first interest rate cut in January/March/May. If the data is better ("good" here means favorable to us), then the probability of a rate cut in March is higher/the expected number of rate cuts for the whole year is more. (The rate cut in January is still a low-probability event, so the main bet is March VS May)
At the same time, there is a dot plot in March, which means that the expected number of rate cuts for the whole year will be given in March. If the data in January is positive and January gives a very dovish rhetoric, then the expectation of a rate cut in March will increase, and the bull market is likely to continue. If the rate cut is postponed to May, it is likely that it will fluctuate in the range until April before starting to pull up.
At the same time, the dot plot is also very important - if the March dot plot gives an expectation of more than 2 times throughout the year (currently there are two times in December, and if there can be 2-3 more times after the March cut), it will also be regarded as a positive. Therefore, if the FOMC in January and March are in line with our wishes, there may be a long-term pull from January to May, which is the so-called mountain season.
On the contrary, if the FOMC in January does not meet our wishes, and March does not meet our wishes, and only cuts interest rates once in May, then the market may fluctuate at a low level from January to April (the possibility of 86,000 wash-out is not ruled out), rebound in April to around the May interest rate cut, and then continue to fluctuate in June (similar to the trend from April to August 2024).
As for whether the cottage can reach a new high. I can say that insufficient liquidity is an excuse to explain the decline, but it is not the real reason for the decline. The real reason for the decline is "expected to fall", and the reason for the rise is also "expected to rise". The market value of USDT in 2021 is only half of what it is now, but it can still support the bull market of Shansai, and this round is not surprising. As long as there is "expectation", Shansai may not rise 100 times, but it is no problem to exceed the high point of 2021 by 50%-100%. In addition, there is another complex variable, the Trump factor. The Trump factor is the main reason for the crazy rise of BTC since November. (Although in my opinion, it only affects the degree, not the direction) Trump officially took office on January 20. Trump's impact on the market is multifaceted. First, his economic policy may take the form of direct interest rate cuts to stimulate the stock market and the economy. Second, his policy may lead to repeated inflation, and Powell's suppression of 25-year expectations in December also took Trump into consideration. Third, his direct benefit to the currency circle may lead to direct pull-ups of some beneficiary currencies (rather than "macro leads to liquidity leads to XX leads to YY leads to ZZ leads to rises" - but a simple and crude direct pull-ups).
Therefore, the topic of Trump is a very grand topic, and it is difficult to explain the pros and cons of the competition in a few words. After the general direction is confirmed, you can focus on choosing Trump-related currencies (more rise, less fall) when choosing coins.
There is not much we can do next. On the one hand, we should wait and see, and on the other hand, we should respond to the variables in the future in a timely manner. If everything goes well, maybe "the big one is really coming", if not, maybe we will return to the shock from April to August last year. No matter which situation occurs, be mentally prepared, so that when it really occurs, take the right approach to deal with it, which is the solution.
Anais
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